Budget 2024: Labour’s Vision for London’s Property Market

As we approach the much-anticipated Budget for 2024, young Londoners are collectively crossing their fingers, hoping to see some concrete measures that will finally help them ascend the daunting property ladder. The current climate presents an overwhelming challenge for first-time buyers, with average deposits soaring to an astronomical 30%, approximately £142,588, far surpassing the £58,000 typically required elsewhere in the UK. To add insult to injury, Savills reports that London’s first-time buyer properties are valued at a staggering 85% above the national average, standing at £469,740.

Will the upcoming Budget deliver a much-needed boost for first-time buyers?

Despite a relatively quiet property market, house prices in the capital still show signs of entering an upward trajectory. Recent insights from Rightmove indicate a 1.8% rise in asking prices across London during September, marking the most substantial increase observed in any region. With anticipated base-rate cuts in November and December, there are underlying fears that this may further escalate both sales and prices through the winter season. However, the pivotal question remains: will the Budget provide the necessary support for Londoners striving to achieve homeownership?

Running the Numbers: Can Labour’s Targets Meet Reality?

With lofty ambitions, the newly-installed Labour government has set ambitious housebuilding targets, aiming to more than double annual completions from 35,000 to 80,000 homes in London. While the intent to rectify the persistent supply shortage is commendable, industry experts are expressing reservations. This target is 114% above the recent average, and as pointed out by Marcus Dixon, director of Residential Research at JLL, the market must foster potential sales to sustain further construction efforts.

“Developers will not build if they don’t see a market,” notes Dixon.

To ensure that affordable housing can be developed alongside regular market offerings, local authorities need to focus on selling 45,000 homes at standard market rates each year—three times the current sales figures. Labour’s goal may be well-meaning, but its success hinges on its ability to stimulate genuine buyer confidence.

The Silence Speaks Volumes: A Call for Action

With affordability a significant issue and many tenants unable to save due to high rental costs, the industry is clamoring for substantial intervention. The reintroduction of initiatives like Help to Buy appears to be the missing piece of the puzzle. However, as Paula Higgins, CEO of the HomeOwners Alliance, underscores, the outlook for first-time buyers remains bleak.

“We are not overly optimistic that there will be a great deal to support first-time buyers,” Higgins stated, alluding to the grave financial obligations the government faces.

With the focus shifting towards funding social housing rather than homeownership, first-time buyers are caught in a holding pattern, devoid of clear pathways to owning their homes. As the property landscape morphs, so must the strategies aimed at alleviating the burdens placed on buyers.

Deteriorating Prospects: The Reality of Stamp Duty

Among the proposed reforms, the increasingly criticized stamp duty continues to loom like a dark cloud, deterring potential home sellers and stifling market fluidity. Current whispers suggest that the Chancellor may revert the nil-rate band for first-time buyers to £300,000 from £425,000. In London, where 25% of properties lie below £425,000, this shift could impact a staggering 71% of future first-time buyers making it an uphill battle for them to own a home. Such a change underscores the urgent need for regional policy adjustments tailored to local price realities, otherwise, we risk alienating an entire generation of potential homeowners.

Young couples face tough decisions navigating London’s housing market.

What Remains for Aspiring Homeowners?

In efforts to mitigate the struggles faced by prospective buyers, the mortgage guarantee scheme initiated in 2021 is undergoing a facelift, rebranding itself as Freedom to Buy. This initiative aims to ease the burden of securing a deposit by allowing discerning buyers to procure mortgages at a 95% loan-to-value ratio, requiring them to only muster 5% upfront. However, experts, including Mark Harris from SPF Private Clients, argue that this scheme lacks transformative potential, given existing access to similar products between banks and developers.

“The real need is for a comprehensive Help to Buy initiative that encompasses all property types across the capital,” Harris emphasizes, marking a clear desire for a robust policy shift.

Furthermore, reforming the Rent a Room scheme and updating Lifetime ISAs are also critical areas for reconsideration. The financial landscape hasn’t adapted to recent inflationary pressures, and addressing these matters would empower aspiring homeowners while fostering stability in the housing market.

The Pursuit of Ownership: A Personal Journey

Take, for instance, the experiences of local renters Gustavo Tavares and Carlota dos Santos. These individuals, both in their thirties, exemplify the struggle to find a foothold in a market that continuously escalates. After saving for six years, the couple was set on finding a home in London Fields but ultimately shifted their focus to Bow due to soaring prices in their desired area.

Gustavo’s story highlights the balancing act many young professionals are performing: “Buying a new-build flat off-plan means we are buying a property at today’s price, but with completion two years away it will have already gone up in value.” Such hopes hinge on a decline in interest rates making it feasible to secure a mortgage that isn’t defined by crippling payments.

Conclusion: The Future of London’s Housing Market

The upcoming Budget carries immense weight amid an anxious market filled with aspirations and frustrations. It holds the potential to reshape the landscape for first-time buyers in London significantly. However, without substantial reforms that directly address escalating house prices and the urgent need for affordable housing, the vision for homeownership may remain just that—a vision.

In the face of prevailing economic strains, we must remain vigilant and hopeful for real solutions that will empower young Londoners to take the first step towards homeownership. With the right policies in place, the dream of owning a home in our vibrant capital isn’t just a dream—it can become reality.